What is the context for this statement and is it meant to be understood in a literal sense, a figurative sense — or perhaps in these two apparently contradictory manners?

When Rav Nachman and Rabbi Yitzchak were having a meal together, and Rav Nachman requested a dvar Torah, Rabbi Yitzchak replied with a teaching he had learned from Rabbi Yochnan, that Yaakov Avinu did not die. But rather than Rav Nachman questioning the “amazing” possibility of Yaakov Avinu not having passed from this world, his question came from a different angle — the words of the Torah’s narrative. “Was it for naught that the eulogizer eulogized him, the embalmers embalming him!?” (See Ber. 50:26)

Rabbi Yitzchak then replied, seemingly sidestepping this question, saying, “What I am asserting can be derived from a verse in the Torah: ‘And fear not, My servant Yaakov, says Hashem, and do not be dismayed, O Yisrael, for behold I save you from afar and your seed from the land of their captivity, and Yaakov will again be at peace and at ease, with no one to frighten them.’ (Yirmyahu 30:10) This verse equates Yaakov and his descendants, teaching that just as his descendants are alive, Yaakov too is alive.”

Rashi explains this teaching in a semi-literal manner: Yaakov Avinu lives forever, and the various acts performed after his non-death were done since he appeared as if he had died. Rashi also explains the phrase “Just as his descendants are alive, Yaakov too is alive” to mean the following: “In the future when Hashem gathers in the exiles from the lands in which they are captive, He will gather in those who are alive at the time and not those who have already passed from this world. Likewise, at that time Hashem will bring Yaakov Avinu to witness this ingathering of the exiles — his descendants — so that they will be saved in his very presence, just as the redemption of the Jewish people from Egypt at the time of the Exodus took place in the presence of all of surviving members of Klal Yisrael.”

Another explanation of the message in our sugya is suggested by a number of commentaries, and is a more “allegorical” approach, in a sense. Our Sages in Tractate Berachot teach that righteous people are called “alive” even after death, and wicked people are called “dead” even while they are alive. When Rabbi Yitzchak stated that Yaakov Avinu did not die, he was alluding to this concept since Yaakov Avinu was undoubtedly righteous. Therefore, even after his natural, physical death, he is considered alive. Rabbi Yitzchak mentioned Yaakov Avinu, although the same life-principle should certainly also apply to Avraham Avinu and Yitzchak Avinu (and many others) because not only was Yaakov Avinu righteous, but all of his children were righteous as well. In Jewish thought, children are considered and viewed as a continuation of their parents, and as long as the children are alive, their parents are also alive. (The corollary to this concept is that if one’s child is wicked, the parents are also considered not alive, in a sense, because “the wicked are called ‘dead’ even when they are alive.”) Rashi in Chumash (Ber. 18:19) similarly teaches that a parent who dies, leaving behind a righteous child, is considered alive.

According to these more allegorical commentaries, Rabbi Yitzchak derives an extremely important message from the verse compareing Yaakov Avinu to his children. Yaakov Avinu is considered alive because he lives on through his children, who are righteous. Likewise, all parents who — as a result of serious efforts to raise children who are sincere in following the ways of Hashem — merit children who are righteous, are always alive. (See Kli Yakar, Maharsha and Abarbanel)